Agenda - Economic Development Authority - 09/09/2010

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Case # CONSIDER PSD LLC BUSINESS SUBSIDY REQUEST By: Heidi A. Nelson, Deputy City Administrator/Community Development Director Background: At the August 12th EDA meeting, the request for business subsidy from PSD LLC was reviewed. As the EDA will recall, an application for business subsidy was recently received from PSD, LLC requesting assistance with sewer access charges (SAC) and water access charges (WAC) for the Wells Catering/restaurant development -The Falls - at the 7533 Sunwood Drive location. Wells Catering would be relocating from another location within the City of Ramsey to this location within The COR. The EDA also recently preliminarily approved a Revolving Loan Fund Application for Wells Catering, pending City Council approval, to fund equipment as part of this relocation in the amount of $65,000. The case is anticipated to be presented to the City Council in September. Observations: As an overview of the information discussed at the August EDA Meeting, this project would be charged 11 SAC units (2,100 a unit) and 11 WAC units (1,627 a unit). The amount of assistance being requested by the applicant is $40,997. There is no bank financing in this project for the tenant improvements, it is funded 100% with owner equity. Generally when the EDA lends assistance to a project, it is done ixi an effort to fund a gap in the bank financing and owner equity provided for the project. It is difficult to ascertain the necessity of public assistance for this project as there is no bank financing in the project and it is potentially feasible that the owner could provide the additional funding for the project with equity. PSD LLC states that this assistance will allow them to provide Wells Catering a lease at a lesser rate to accommodate the lease at their existing site through April 1, 2011. As noted during the EDA meeting, project proformas and financial statements for PSD LLC and their principals were not provided with the application. Following the August 12th meeting, staff requested project proformas for the lease of the space, however only a draft lease agreement that anticipates assistance was provided to staff in addition to the original draft lease (previously received) that did not anticipate assistance. As- of the prepazation of this case, staff is reviewing the terms provided in each lease and will be prepared to review this with the EDA during the meeting. An additional measure for the justification of public assistance is job creation. With the addition of The Falls to the Ramsey Office Plaza Building at 7533 Sunwood Drive, PSD, LLC will be creating two full time jobs: one (1) maintenance person, one (1) property management/mazketingpersnn. Wells Catering will be creating two (2) new jobs and converting four (4) part-time positions to full time positions.. The average wage predicted for these jobs is $15 per hour. Median wage for the seven- county metro is $19.13 for all jobs for 2010 per DEED; EDA policy requires that jobs meet 70% of the median wage, which would be $13.39 per hour; thus the jobs created by the project meet the test. If the EDA supports this application, the EDA could consider structuring the assistance similar to the structure for the Sophia Ramsey LLC assistance package, whereby, if the restaurant remains in business for five yeazs, the assistance could become forgivable. Other options for the. EDA to consider would be to buy-out the end of the lease at Wells Catering's current location. Funding Source: Funding for this assistance is proposed to come from the EDA budget. 7